Trump's obsession with loyalty raises concerns over his preferred pick to lead the Federal Reserve

Donald Trump has the unique power to reshape the Federal Reserve in the coming months by filling a slate of open and expiring spots on the central bank’s powerful board — most notably a chance to pick its next chair early next year.

That’s not necessarily because a Fed chair can’t have worked on Wall Street, although a lifelong career, and one culminating in the C-Suite at Goldman Sachs, should at least raise some eyebrows given the Fed’s central role as a big bank regulator.

It’s also not because the Fed chief cannot be a former presidential adviser. Ben Bernanke was head of George W. Bush’s Council of Economic Advisers, and current chair Janet Yellen herself served as CEA head under Bill Clinton in the 1990s.

In addition, his appointment would cement Goldman Sachs’ dominance over both the Fed and other major central banks, undermining already low public confidence in institutions seen as having bailed out big banks at the expense of taxpayers during the financial crisis. Cohn would be the fourth sitting Fed official who used to work at Goldman, and the third head of a major central bank to have emerged from the megabank — Mario Draghi and Mark Carney of the European Central Bank and the Bank of England are both ex-Goldman.

Central banking experts Stephen Cecchetti and Kermit Schoenholtz, respectively of Brandeis International Business School and New York University’s Stern School of Business, are really worried about the Fed’s long-term standing under Trump’s rule.

In a chapter in the e-book “Economic and Policy in the Age of Trump,” the two write:

“One concern is that President Trump or his cabinet will interfere in the work of the Federal Reserve by arguing for or against specific policy actions,” Cecchetti and Schoenholz warn. “It is easy to envision cases in which the executive branch of the federal government would blame independent monetary policymakers when things go wrong. Were the Administration to become openly critical of monetary policy, it would break a lengthy tradition that has helped to keep US inflation expectations low and stable.”